Sprint drops web hosting and cuts 500 jobs

Sprint will lay off about 500 workers as it winds down its web hosting operations nationwide.

Sprint will lay off about 500 workers as it winds down its web hosting operations nationwide.

The move follows Cable and Wireless' (C&W) announcement on 4 June that it would abandon the US web hosting and services market, slashing 1,500 jobs in the process. C&W said it was losing about $1m (£600,000) a day in the US market.

Sprint said it would transfer current hosting customers to preferred third-party providers or partners and will no longer pursue direct sales of hosting to enterprise business customers.

Sprint's Global Markets Group will instead focus more on selling IP-related products and services that are part of hosting, such as managed services and network transport on its IP backbone.

Hosting activities contributed about $60m (£35.9m) in revenue for the 12 months that ended 31 March, but the costs associated with offering services were much higher, Sprint said.

Pretax charges for the move could run as high as $475m (£284m), including $300m (£179m) related to the cost of hosting assets and as much as $175m (£105m) for customer migration, employee termination and the termination of leases.

"Sprint's priorities have clearly been articulated and include growing top-line revenue and protecting and improving the company's bottom line," said Howard Janzen, president of Sprint's Global Markets Group.

"Those priorities require us to constantly monitor and review which areas make both economic and strategic sense to pursue on behalf of customers, investors and shareholders."

Counse Broders, an analyst at Current Analysis, said market-watchers expected Sprint to exit the web hosting market, which has been shrinking for the past two years.

A number companies provide web hosting, and Sprint had trouble offering services to the biggest enterprises while small and medium-sized businesses took their web hosting business to smaller providers, Broders said.

Some web hosting companies have been able to consolidate operations because of the advent of blade servers that take up much less space than traditional server cabinets, Broders said.

Matt Hamblen writes for Computerworld

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